China To Exceed US Credit Card Use By 2020

We don’t need to worry about China getting ahead, Mastercard said today that China is set to surpass the US by 2020 in America’s favorite pastime: using credit cards. It will only be a matter of time after that they implode on a consumer credit bubble, muahaha, exactly as we planned. See, you’re not the only ones that can export poison!

Don’t worry, those Chinese citizens who get over their head in debt with just be pressed into perpetual involuntary service, all their assets seized, and their children sold to the highest corporate bidder. No need to worry about the credit bubble.

Credit card usage in China is somewhat surprising. Even corrupt government officials know to use cash, and to store your millions of dollars of money wrapped up and under your koi pond. Considering that paying for cash for basically anything is ok there, I wonder who is actually using credit cards?

Some people are just really scared of carrying large amounts of cash these days due to news stories of robberies, others are enticed by the rewards programs (Coldstone here has a buy-one-get-one-free promo if you pay with a Citi card, though for the average reader of this website that’s hardly enough motivation to get one), and that’s about it for offline usage. Online, they’re just about the only way to buy something from overseas (JCB for Japanese purchases, Visa/MC for most others; AmEx is kinda the odd one out here).

Ahem, as someone in China who’s using a local credit card, let me say a few things:
1. Local CCs are rather tightly regulated ever since a string of stories appeared of kids who didn’t know what they were getting into got themselves into debt. The CARD Act pales in comparison to what’s been put up here as barriers to entry. Verified income (need a statement of income from your company stamped with corporate seal- they’ll call your employer to check, or a VIP account with them to show “adequate financial ability”, like having HSBC Premier), restrictions on non-citizens getting cards (some won’t do it at all, some won’t even allow foreign authorized users on local people’s cards), no more student cards except at a couple of the largest banks (one requires your parents to cosign, another starts you off with a credit limit equivalent to about US$1.50).
2. Continuing on the above, better interest rates. Pretty close to zero, in fact (0.05%?). I’m very clearly told what the interest-free period is (29 days on my card, depending the card you can get up to 58 days interest-free), what the interest is when it does start (daily, not in APR format), and all that. Kinda wish this would happen to the US credit card industry.
3. They act differently. Because the credit cards run on the debit card network and not the other way around the same low interchange fees apply to them as to directly-swiped debit cards. This means that I can swipe for less than US$0.50 and no one will care, I can pay my bill at any deposit-capable ATM (drop in the cash, confirm, and go- easy as pie), and I can also pre-deposit a load of money if I want to buy something that exceeds my limit (remember the $1.50 limit mentioned above? They lift it to US$70-something after three months of normal usage, and then US$300 or so after a year, but until then if I want to buy anything bigger than a soda and a pack of gum or so I need to pre-deposit the money).
4. Their usage extends beyond credit here. The Japanese government is said to use your ability to get a “gold” credit card or better (there are income requirements for “regular”, “gold”, and “platinum” cards here for every bank that issues them) as an indication of sufficient economic ability and ties to China to issue a tourist visa. Japanese visas used to be a pain in the rear to get for Chinese people (so in the end, loads of them just did it illegally- sound familiar?).
5. They’re also handy due to currency regulations. Visa Debit cards issued here don’t work for online purchases. Visa credit cards do. This is apparently due to some obscure exchange regulation. As a bonus, JCB cards work for iTunes Japan (they usually don’t take any cards issued outside Japan- JCB seems to be the exception) and loads of Japan-based online stores that don’t otherwise take foreign cards.